2026 Charitable Giving Tax Changes: What Every Nonprofit Board Needs to Know About the One Big Beautiful Bill Act
By 501 CPAs | Updated March 2026 | Washington, DC
At a glance: The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025 (Public Law No. 119-21), made sweeping changes to the charitable deduction rules starting in the 2026 tax year. These changes directly affect how much your donors can deduct — and that affects how much they give. Every nonprofit executive director and board member needs to understand what changed, what it means for fundraising, and what your organization should do right now. 501 CPAs breaks it all down below with the specific IRC sections, practical examples, and action steps your nonprofit needs.
What Changed: The Six Major Charitable Giving Provisions in the OBBBA
The OBBBA contains six provisions that reshape the charitable giving tax landscape for 2026 and beyond. Some are good news for nonprofits. Some are not. Here is a plain-language summary of each one, with the specific Internal Revenue Code sections your CPA will need to reference.
1. New Above-the-Line Deduction for Non-Itemizers (IRC § 170(p))
What is the new above-the-line charitable deduction under the OBBBA?
Starting in the 2026 tax year, taxpayers who claim the standard deduction can deduct cash charitable contributions up to $1,000 for single filers and $2,000 for married couples filing jointly. This provision is codified in the newly created IRC § 170(p).
This is a significant development for nonprofits. Approximately 86% of taxpayers take the standard deduction, according to Tax Foundation estimates. Before the OBBBA, those taxpayers received zero federal tax benefit for charitable giving. Now, for the first time since the temporary CARES Act provisions expired after 2021, a meaningful charitable deduction is available to the vast majority of American taxpayers.
What qualifies for the IRC § 170(p) deduction?
There are specific eligibility rules nonprofits and their donors should understand:
Only cash contributions qualify. Donations of property, securities, clothing, or other non-cash items are not eligible.
Only gifts to public charities qualify. The recipient must be a public charity described in IRC § 170(b)(1)(A) — churches, educational institutions, hospitals, publicly supported organizations, and government entities.
Donor-advised funds (DAFs), supporting organizations, and private nonoperating foundations are excluded. Cash gifts to these entities do not qualify for the § 170(p) deduction.
The deduction is not indexed for inflation. The $1,000 / $2,000 limits are fixed amounts.
Standard substantiation rules apply. Donors must maintain a bank record or written acknowledgment from the charity showing the amount, date, and confirmation that no goods or services were provided in exchange, per IRC § 170(f)(8).
Why this matters for your nonprofit
This provision creates a direct tax incentive for roughly 150 million taxpayers who previously had none. Nonprofits that receive a high volume of smaller cash donations — particularly churches, community-based organizations, food banks, and human services nonprofits — stand to benefit the most.
Practical example: A married couple with $95,000 in adjusted gross income takes the standard deduction. In 2025, their $1,500 annual donation to a local food bank generated zero federal tax benefit. In 2026, they can deduct $1,500 (up to the $2,000 cap) under IRC § 170(p), saving them approximately $180 in federal taxes at the 12% bracket. That is a meaningful incentive for middle-income donors.
2. New 0.5% AGI Floor for Itemizers (IRC § 170(b)(1)(I))
How does the new 0.5% floor affect itemized charitable deductions?
For taxpayers who itemize deductions, the OBBBA creates a new floor on the charitable contribution deduction beginning in 2026. Under the newly enacted IRC § 170(b)(1)(I), charitable contributions are deductible only to the extent they exceed 0.5% of the taxpayer's adjusted gross income (AGI).
This floor applies to all charitable contributions regardless of the type of donee organization or the form of property donated. It operates independently of the existing AGI percentage limitations under IRC § 170(b)(1).
How is the 0.5% floor calculated?
The calculation is straightforward: multiply the taxpayer's AGI by 0.005. That amount represents the non-deductible portion.
Practical example: A donor with $200,000 in AGI makes $8,000 in total charitable contributions during 2026. The floor is $1,000 ($200,000 × 0.005). Only $7,000 of their $8,000 in contributions is deductible. The first $1,000 provides no tax benefit.
Higher-income example: A donor with $500,000 in AGI makes $15,000 in charitable contributions. The floor is $2,500 ($500,000 × 0.005). Only $12,500 is deductible.
What is the ordering rule for the 0.5% floor?
Congress codified a specific ordering rule that determines which contributions are reduced first by the 0.5% floor. The floor is applied in the following sequence, which allows the highest-limitation gifts to apply last, maximizing overall deductibility:
Capital gain property to private nonoperating foundations (20% AGI limitation)
Capital gain property to public charities (30% AGI limitation)
Non-capital-gain property to nonpublic charities (30% AGI limitation)
Qualified conservation contributions (50% or 100% AGI limitation)
Non-appreciated property to public charities (50% AGI limitation)
Cash gifts to public charities (60% AGI limitation)
Why this matters for your nonprofit
The 0.5% floor most significantly affects mid-level donors — those who give enough to itemize but whose total charitable contributions represent a modest percentage of their income. A donor giving $3,000 on $400,000 of AGI will see their deduction reduced to $1,000 ($3,000 minus the $2,000 floor). That is a 67% reduction in the tax benefit of their gift.
This may encourage donors to adopt "bunching" strategies — concentrating multiple years of giving into a single tax year to clear the floor more efficiently. Nonprofits should be prepared for this shift in giving patterns.
3. New 1% Floor for Corporate Charitable Deductions (IRC § 170(b)(2)(A))
How does the corporate charitable deduction floor work?
Starting in 2026, C corporations can deduct charitable contributions only to the extent they exceed 1% of taxable income, as enacted under the revised IRC § 170(b)(2)(A). The existing 10% ceiling on corporate charitable deductions remains unchanged.
The floor and ceiling operate in tandem. If a corporation's total contributions fall below the 1% floor, the entire amount is permanently nondeductible — no carryforward is permitted. Carryforwards are only available for contributions disallowed because they exceed the 10% ceiling.
Practical example: A C corporation with $1 million in taxable income donates $9,000 to charity in 2026. The 1% floor equals $10,000. Because the $9,000 in contributions fails to exceed the floor, the corporation receives zero deduction, and the $9,000 cannot be carried forward.
Contrast: The same corporation donates $120,000. The floor reduces deductible contributions to $110,000 ($120,000 minus $10,000). The 10% ceiling limits the current-year deduction to $100,000. The $10,000 that exceeds the ceiling may be carried forward for up to five years. Additionally, the $10,000 disallowed by the floor may also be carried forward because the ceiling was exceeded.
Why this matters for your nonprofit
Nonprofits that rely on corporate sponsorships and corporate giving should be aware that smaller corporate donations may no longer be tax-deductible for the donor. A corporation with $500,000 in taxable income that donates $4,000 to your nonprofit's annual gala will receive no deduction because the gift falls below the $5,000 floor (1% of $500,000).
This does not mean corporations will stop giving — many give for reasons beyond tax benefits — but it does remove a financial incentive for smaller corporate contributions.
4. Reduced Deduction Value for High-Income Taxpayers (IRC § 68)
What is the new limitation on itemized deductions for top-bracket taxpayers?
The OBBBA reinstates and modifies the overall limitation on itemized deductions under a revised IRC § 68, replacing the former Pease limitation that was suspended by the TCJA. Starting in 2026, taxpayers in the 37% marginal federal income tax bracket will see the value of their itemized deductions — including charitable contributions — effectively capped at 35 cents per dollar.
The mechanics work as follows: itemized deductions are reduced by 2/37 of the lesser of (i) total itemized deductions, or (ii) the excess of taxable income over the 37% bracket threshold.
For 2026, the 37% bracket begins at $751,601 for married filing jointly and $578,125 for single filers.
Practical example: A married couple has $900,000 of taxable income and $120,000 in itemized deductions. The excess above the 37% threshold is $148,399 ($900,000 minus $751,601). The reduction equals 2/37 of $120,000 (the lesser of the two amounts) = $6,486. Their allowable deductions drop to $113,514.
Why this matters for your nonprofit
For your highest-capacity donors, a $10,000 charitable gift in 2025 produced $3,700 in tax savings (at 37%). In 2026, the same gift produces approximately $3,500 (effectively capped at 35%). While the dollar difference is relatively small per gift, it signals a directional shift that may affect major gift decisions — particularly for donors making six-figure or seven-figure contributions where the cumulative difference becomes meaningful.
5. Permanent 60% AGI Limit for Cash Contributions (IRC § 170(b)(1)(G)(i))
Is the 60% AGI limit for cash charitable contributions permanent?
Yes. The OBBBA permanently codified the 60% AGI limitation on cash contributions to public charities through an amendment to IRC § 170(b)(1)(G)(i). This limit had previously been a temporary provision under the TCJA, scheduled to revert to 50% of AGI after 2025.
This is unambiguously good news for nonprofits and their donors. Taxpayers who make large cash gifts can continue to deduct up to 60% of their AGI, subject to the 0.5% floor and the high-income limitation discussed above. Contributions exceeding the 60% ceiling may be carried forward for up to five years under IRC § 170(d)(1)(A).
6. Expanded Standard Deduction and SALT Cap Changes
How do the expanded standard deduction and SALT cap interact with charitable giving?
Two other OBBBA provisions indirectly affect charitable giving for nonprofits:
Higher standard deduction. For 2026, the standard deduction increases to $16,100 for single filers and $32,200 for married couples filing jointly, with annual inflation adjustments going forward. The higher standard deduction means fewer taxpayers will itemize — making the new IRC § 170(p) above-the-line deduction even more important.
Increased SALT cap. The state and local tax (SALT) deduction cap for itemizers rises to $40,000 in 2026 (up from $10,000), with 1% annual increases through 2029 and a phasedown for higher incomes. This expanded SALT deduction may push some taxpayers in high-tax states (California, New York, New Jersey, Connecticut, Illinois) back into itemizing, which in turn restores full access to the charitable contribution deduction for those individuals.
What Your Nonprofit Should Do Right Now: 7 Action Steps
These tax changes require a proactive response from every nonprofit. Here is what 501 CPAs recommends:
1. Update your donor communications immediately. Your year-end appeal letters, email campaigns, and website giving pages should reference the new above-the-line deduction. Let non-itemizing donors know that their gifts are now tax-deductible up to $1,000 / $2,000 starting in 2026. This is a compelling new talking point for your development team.
2. Educate your board of directors. Board members — especially those involved in fundraising — need to understand these changes. Schedule a 15-minute overview at your next board meeting. Use the examples in this article as a starting point.
3. Prepare for "bunching" behavior from mid-level donors. The 0.5% AGI floor creates an incentive for some donors to concentrate their giving into fewer, larger gifts rather than spreading smaller gifts across multiple years. Your fundraising team should proactively discuss multi-year gift agreements, giving circles, and donor-advised fund strategies with your mid-level and major donors.
4. Review your corporate sponsorship strategy. The new 1% corporate floor means that smaller corporate gifts may no longer be deductible. If your nonprofit relies on corporate sponsors, consider offering non-tax-related value propositions (brand visibility, employee engagement opportunities, community impact metrics) alongside the traditional tax benefit.
5. Promote Qualified Charitable Distributions (QCDs) for donors 70½ and older. QCDs from traditional IRAs bypass both the 0.5% AGI floor and the high-income limitations entirely. Donors age 70½ or older can direct up to $105,000 (indexed for inflation) from their IRA directly to a public charity, excluded from taxable income. This is now one of the most tax-efficient ways to give.
6. Ensure substantiation compliance. Under the new rules, documentation is more important than ever. Make sure your nonprofit provides written acknowledgment letters for all donations of $250 or more, per IRC § 170(f)(8), and that acknowledgments clearly state whether goods or services were provided in exchange for the contribution.
7. Consult with a nonprofit CPA. The interaction between the 0.5% floor, the 60% AGI ceiling, the ordering rules, carryforward provisions, and the high-income limitation is complex. Your nonprofit's CPA can help model scenarios for major donors, advise on gift acceptance policies, and ensure your Form 990 reporting reflects these changes correctly.
Frequently Asked Questions
Can non-itemizers deduct charitable contributions in 2026?
Yes. Starting in the 2026 tax year, taxpayers who claim the standard deduction can deduct up to $1,000 ($2,000 for married filing jointly) for cash contributions made directly to public charities under the new IRC § 170(p). Contributions to donor-advised funds and private foundations do not qualify.
What is the 0.5% AGI floor for charitable deductions?
Beginning in 2026, individual taxpayers who itemize can only deduct charitable contributions that exceed 0.5% of their adjusted gross income, under IRC § 170(b)(1)(I). For a taxpayer with $300,000 in AGI, the first $1,500 in charitable giving is not deductible.
How does the 1% corporate charitable deduction floor work?
Under the revised IRC § 170(b)(2)(A), C corporations can deduct charitable contributions in 2026 only to the extent they exceed 1% of taxable income. Contributions below the floor are permanently nondeductible — they cannot be carried forward. The existing 10% ceiling remains unchanged.
Does the 0.5% AGI floor apply to Qualified Charitable Distributions (QCDs)?
No. QCDs from IRAs are excluded from gross income entirely under IRC § 408(d)(8) and are not subject to the 0.5% AGI floor, the 60% ceiling, or the high-income limitation. For donors 70½ and older, QCDs remain one of the most tax-efficient giving strategies available.
Are contributions to donor-advised funds (DAFs) affected by the OBBBA?
Yes, in specific ways. Contributions to DAFs do not qualify for the new above-the-line deduction under IRC § 170(p). However, DAF contributions remain fully deductible for itemizers (subject to the 0.5% floor), and the 60% AGI limit for cash contributions to public charities that sponsor DAFs is now permanent. Many tax advisors are recommending DAFs as a bunching strategy to overcome the 0.5% floor.
When do these charitable giving tax changes take effect?
The provisions take effect for tax years beginning after December 31, 2025. For calendar-year taxpayers, this means the 2026 tax year — the return they will file in 2027.
What is the standard deduction for 2026?
The standard deduction for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly, with annual inflation adjustments thereafter.
What is the SALT cap for 2026?
The SALT deduction cap increases to $40,000 for 2026 (up from $10,000 under the TCJA), with 1% annual increases through 2029 and a phasedown for higher-income taxpayers.
Summary Table: Before and After the OBBBA
Provision Before OBBBA (2025) After OBBBA (2026+) IRC Section Non-itemizer charitable deduction None (expired after 2021) Up to $1,000 / $2,000 for cash gifts to public charities § 170(p) Itemizer floor on charitable deductions None First 0.5% of AGI is non-deductible § 170(b)(1)(I) Corporate charitable deduction floor None First 1% of taxable income is non-deductible § 170(b)(2)(A) Top-bracket deduction limitation None (Pease suspended) Deduction value capped at 35% for 37% bracket § 68 AGI limit for cash gifts to public charities 60% (temporary, expiring) 60% (permanent) § 170(b)(1)(G)(i) Standard deduction $15,000 / $30,000 $16,100 / $32,200 § 63(c) SALT deduction cap $10,000 $40,000 § 164(b)(6)
How 501 CPAs Helps Nonprofits Navigate These Changes
501 CPAs is a CPA firm based in Washington, DC that works exclusively with nonprofit organizations. We help 501(c)(3) nonprofits, trade associations, advocacy organizations, and foundations manage their accounting, financial reporting, and tax compliance — including Form 990 preparation and audit support.
If your nonprofit needs help understanding how the OBBBA affects your organization, your donors, or your Form 990 reporting, schedule a free consultation with 501 CPAs today.
Book a Free Call with 501 CPAs →
Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. The information is current as of March 2026. Nonprofit organizations and their donors should consult a qualified CPA or tax advisor for guidance specific to their situation. 501 CPAs is a CPA firm specializing in nonprofit accounting and tax services, located at 1763 Columbia Rd NW #1028, Washington, DC 20009.
Related Posts from 501 CPAs:
Authoritative Sources Referenced:
Last updated: March 25, 2026 | 501 CPAs | Washington, DC Nonprofit CPA Firm